Remortgage - should you shop around or stick with the lender you have and get a new fixed rate?
What do you do When the fixed rate ends on your mortgage? Shop around for a new deal? Or simply contact your lender and ask for a product transfer to another one of their fixed deals? Or do you move on to the standard variable rate? This article explains the pros and cons of fixed-rate deals and what you should do when yours ends.
Most homeowners will take out a mortgage on a fixed-rate basis. It gives peace of mind that no matter what happens in the economy, your monthly outgoings are constant and, therefore, easy to budget. These deals usually last two years, but longer terms are becoming more popular, with some lenders offering five and even ten-year fixed deals.
But what happens when that fixed-rate term comes to an end? If you do nothing, your mortgage will revert to the standard variable rate outlined at the start of the mortgage. This is usually set at a specific percentage above the Bank of England base rate, meaning that as the Bank of England alters the interest rate, the interest rate on your mortgage payments will change. This could be a positive thing if, when you initially took out your mortgage, the percentage of the standard variable rate was relatively low; your payments may go down. But, with uncertainty in the economy, particularly at the moment with rising living costs, inflation rates, and, as a result, interest rates, the monthly cost of your mortgage could change every few months, and you'll have no warning or idea of when the charges will vary.
If you're uncomfortable with a life on the edge that a variable mortgage would bring, it might be a good idea to fix your mortgage again when your deal ends. But what is the best way to do that?
You could contact your mortgage lender and ask them about their current deals. They can transfer you over to a new product with minimal fuss. Sounds simple, right? But is it the best way? Perhaps not.
As you might already know, mortgage lenders and brokers have different deals and packages available all of the time, and hundreds of lenders in the UK offer loans to people with varying circumstances. With that in mind, a 'better' deal would likely be available for you from an alternative lender. So, should you perhaps shop around?
By speaking to an independent mortgage broker, you'll have access to all of the lenders and products on the market at the time of your remortgage. This way, you can be confident that you're on the best deal available and are not paying more than you need to for your monthly mortgage.
But it's not so straightforward. If you speak to your current lender and have a transfer to a new product with them, you'll have some forms and paperwork to complete and documents to sign and return. But, if you shop around and decide to remortgage with an entirely new mortgage lender, there will be a complete remortgage process to go through, calls, evidence, financial information, documentation, solicitors-the works. Whilst it might be a better financial deal, there is a process that you have to go through to put this in place.
If you have the capacity for meetings, calls and paperwork, then an entirely new mortgage may be the best way to proceed. But, if life is super busy and you don't have the time to sit and think, maybe a new fixed deal with your current lender will be on the cards. Or, if you're happy living life on the edge and have the budget to afford your mortgage if the amount fluctuates month by month, then perhaps a few months on the variable rate until you have the time to dedicate to arranging a new fixed deal, is the best option for you.
If you have any questions about mortgages or perhaps need to know the value of your property today as part of your remortgage, contact our team of experts today.